TBLI CONFERENCE™

Building a global community of ESG and Impact Investors

A unique learning and networking event series in financial hubs across Europe, Asia and the US for investors and financial professionals. We help mobilize private capital for sustainable investment for more than 15 years.

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Guest Blog Post written by Ellen Wheeler during TBLI CONFERENCE™ NORDIC 2015. Views and opinions are that of the writer and are not the official views of TBLI CONFERENCE™.

The Inter American Development Bank (IDB), like many DFIs define its development impact with intentionality. Ellen Wheeler sat down with IDB’s Senior Development Effectiveness Specialist, Maria Kronsteiner, to understand their view of sustainability and impact investing going forward.

How does impact investing play a role in IDB?

With deliberateness in mind, IDB’s impact projects follow a strict mandate and project management process in working with SMEs in Latin America gain long-term investments. Its role is to provide solutions in circumstances where commercial banks cannot support investments due to their risk factor. A continuously growing gap that DFIs, like IDB, aim to fill.

The Inter American Development Bank works through financial intermediaries to support SMEs. Roughly 32-percent of their business is directly with SMEs or larger companies that have values chains with SMEs. Their alternative approach is to provide investors with capital to invest in SMEs, with an understanding that there are certain objectives they have to meet, for example environmental and social impacts. IDB provides support in how to go about mitigating risks. IDB aims to ensure that the initiatives they work with are effective and achieve IDB’s objectives. Targets are put in place to measure performance throughout the project. It is important that the projects, while having an environmental and social impact, are also financially viable.

The general consensus amongst those in the impact investing community is the need to make it more mainstream. During the workshop on impact investing developments in the Nordic region and beyond, the panelists echoed a resounding theme which was the idea of taking impact investing to wall street and main street by expanding the investable sectors. There is room for growth in renewable trade, social housing, SME banking and more.

The ideal scenario would be to have an impact investor network and knowledge platform, which could provide advice on impact investment strategies to fit specific investor profiles. Regardless of whether an investor is impact first or finance first, to get involved in the impact investing space there must be some willingness to look beyond financial return and see the added non-financial value of social or environmental impact. Investors also need to stop viewing impact first versus finance first as either right or wrong, when in fact they are just two sides of the same coin depending on priority.

One of the key issues is sourcing investment opportunities that have potential for impact as well as financial return – and can be accurately measured in both aspects. For entrepreneurs, an investment readiness program could provide advice on funding and capitalization, answering questions related to identifying investable projects and defining appropriate methodologies and criteria for impact measurement. It is also important to assess what the gaps are in the market for specific investments as well as what existing financial instruments are available and can be expanded for this purpose.

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TBLI CONFERENCE™

Building a global community of ESG and Impact Investors

A unique learning and networking event series in financial hubs across Europe, Asia and the US for investors and financial professionals. We help mobilize private capital for sustainable investment for more than 15 years.